The Nineteen-Billion-Dollar App

WhatsApp, a mobile instant-messaging company founded five years ago by Jan Koum and Brian Acton, is not a particularly groundbreaking, elegant, exciting, charming, or even distinctive service. People use its apps to send free text messages or photos to each other from their phones, the way they do with countless similar services, like Apple’s iMessage, Skype, or traditional S.M.S. Yet Facebook wanted WhatsApp so much that it paid nearly twenty billion dollars for it, one of the largest tech acquisitions of the past fifteen years.

Facebook’s purchase of WhatsApp, at its simplest and most abstract level, is a story of very large numbers: Facebook has over 1.2 billion users, and it would like many more, so it is paying some nineteen billion dollars (twelve billion in Facebook stock, four billion in cash, plus another three billion in stock if WhatsApp’s employees stick around for four years) for a company that has nearly half a billion active users who exchange roughly fifty-three billion messages a day—including six hundred million photos, two hundred million voice messages, and a hundred million videos. WhatsApp reached four hundred and fifty million users in five years, faster than any company in history, and there will soon be more messages sent each day through WhatsApp than with S.M.S., the default service for sending text messages between phones. Unlike many startups, though, WhatsApp has a small revenue stream—it charges users a dollar per year after their first year using the service.

When Facebook turned ten, a few weeks ago, Mark Zuckerberg subtly revealed to _Bloomberg Businessweek_that the company had reached a turning point of sorts: it wants to be more than just Facebook, by building or acquiring a number of distinct stand-alone apps, brands, and services, many of which won’t resemble Facebook at all. A source told Kara Swisher, of Re/code, that Facebook is “deciding to be Disney” by “owning all the good content brands.” The post announcing Facebook’s acquisition of WhatsApp seems to confirm this, with a strange, open-ended call for startups to join the Facebook fold: “Facebook fosters an environment where independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefiting from Facebook’s expertise, resources and scale.”

Facebook’s strategy is, in part, a matter of using diversification to insure the company’s continued growth. Though Facebook’s main service continues to develop slowly and steadily, it will likely never expand with the velocity it once did. Facebook will never be cool or thrilling or novel again, either; a lot of the Internet has been remade in its image, one in which our real identity and our Web identity are one and the same. When the company reached a billion users, in the fall of 2012, it explicitly compared itself to a chair—a ubiquitous but stunningly boring part of our lives. Now it seems that Facebook wants to be an entire house, filled with lots of different kinds of furniture.

Just as significantly, every “good content brand” that Facebook owns or acquires is one less threat to the company’s hegemony—particularly if it dominates an area that Facebook does not or can not have a hold on. Anyone glued to a social app that isn’t Facebook, and isn’t owned by it, is someone not looking at Facebook or the ads it sells. The thing that social networks crave more than anything, except more users, is attention from their users. This is why Facebook talks about the amount of time people spend using Facebook on mobile devices, how it’s one of the most popular things that its hundreds of millions of mobile users do on their phone. It’s what led Facebook to spend a billion dollars on Instagram: the photo service understood mobile devices and emotion far more intimately than Facebook did, and its users were deeply engaged; left unchecked—or acquired by a rival—it would have developed into a problem.

Messaging is complicated, though, and deeply fractured: every conversation using a computer is a complex matrix of choices about what we’ll say, whom we’ll say it to, and which service we’ll use to say it. We use Gchat, A.I.M., Skype, S.M.S., Twitter direct messages, FaceTime, Google Hangout, BlackBerry Messaging, or, perhaps, even Facebook chat. There is no single, universally agreed upon way to directly talk to each other through technology and smartphones. But Facebook seems to suspect that WhatsApp could become one of the primary ways that everyone—or close to everyone—will talk to each other, and it has bet a significant portion of its assets on that suspicion. As Dan Frommer, a technology writer and critic, pointed out on Twitter, spending nineteen billion dollars on WhatsApp doesn’t seem entirely crazy in the context of wireless carriers’ S.M.S. messaging services, which generate around a hundred billion dollars per year; WhatsApp already serves nearly as many as messages each day as the entire global S.M.S. system.

It’s not as though Facebook hasn’t tried to build its own messaging service. In 2011, the company acquired a group-messaging company called Beluga, which it effectively turned into Facebook Messenger, a stand-alone chat app. A year later, Facebook introduced the Mercury Project, a fundamental rearchitecting of the way the company would approach messaging, involving everything from rapid iterations in the Messenger app to changing every user’s default e-mail address to one ending in @facebook.com, flowing e-mails into the Facebook messaging inbox. Last year, the company introduced what it called Chat Heads, pushing conversations to the front of its primary applications. It also redesigned Messenger to feel more like a messaging app and less like an extension of Facebook. For its efforts, Facebook Messenger has become a moderate success, consistently hovering among the top twenty free apps in Apple’s App Store. Facebook also recently tried to acquire the disappearing-message app Snapchat for three billion dollars in cash, and was awkwardly and publicly rebuffed. If Snapchat’s C.E.O., Evan Spiegel, had sold his company to Facebook, it’s unlikely that Koum would be worth quite as many billions of dollars today.

This is particularly relevant if you consider the difference in how WhatsApp and Facebook think about their users. When you first sign up for WhatsApp, you’re informed about the pricing model: the first year of service is free; each year after that costs a dollar. A post offering an explanation of why the company charges a nominal fee instead of showing advertising or requiring you to hand over basic demographic information reads like an anti-Facebook manifesto, beginning with a quote from “Fight Club”: “Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need.” The post continues, “These days companies know literally everything about you, your friends, your interests, and they use it all to sell ads”—an apt description of WhatsApp’s new owner. After a few more cutting remarks about advertising, such as “no one jumps up from a nap and runs to see an advertisement,” the page concludes, “Your data isn’t even in the picture. We are simply not interested in any of it.”

Facebook, despite being driven primarily by demographics and advertising, is adamant that it won’t change WhatsApp, an indication of just how overarching the company wants to be: in the pursuit of its next billion users, it is now willing to tolerate a highly discordant new product, like a vast empire that contains many competing nations. Empires always fall; the question now is how big Facebook’s can get before it does.

Photograph: Ole Spata/Picture-Alliance/DPA/AP

Matt Buchanan was a science and technology editor for newyorker.com from 2013 to 2014.

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